4 Steps to Growing a Small Trading Account whether trading Forex market or other financial product: risk management & strategy, cash or margin account.
Forex trading is challenging for most people. It becomes more difficult if you have a small trading account. You might feel that you can’t turn it into a huge trading account. But that’s not the case. If you play wisely and follow certain Forex trading rules, you can grow your account and gain profits. However, you surely need to keep your focus on the planning, strategies, and process if you want to achieve this purpose.
Read the article to learn about the steps to make your small account into a big one.
Develop Your Thinking
The first and foremost thing you need to do is to change your mindset. You need to turn your thinking of “you need to initiate more money for trading” to “how you can achieve a lot of money trading?” This will change your entire perspective and help you think straight, not like a greedy trader who makes mistakes.
You need to avoid thinking that if you have a big trading account, you could have done this and that. Just imagine you already have one and build great strategies and plans for your successful trade. If you don’t do this, you might end up risking too much or over-trading because your entire focus will be merely on making money. So, you need to bring your attention from “money” to “the process.” Every successful trader that you look up to has used this approach to achieve what they have.
There is always going to be someone who thinks smarter than you, faster than you, and better than you. The point is to find the space in which you work as the best possible version of yourself. The online environment is kind to pioneers, but savage to irresponsibility – and there’s a difference.
The road to hell is littered with trailblazing good intentions, no matter how good the idea, no matter how advanced the line of thinking – in the trading world, you have to be able to back it up with more than just a “hunch”. Understanding how the processes work that gets your idea from think tank to development is going to get you there. Every new way of thinking, every new approach, is rooted in the back office, reverse engineering spaces. Take Australian lender, Plenti for example. They realized that traditional forms of lending were simply not cutting it for a large section of the population. So they created a model that funds specific projects as well as personal lines of credit.
This is what we’re talking about. Before you even get to the point where you are confident to start your trading account, starting developing your critical thinking.
Manage Risk Properly
This step is crucial for small account traders than others. As a beginner, your priority should be to protect your capital. Of course, you don’t have extra cash to throw on the wrong trades. That doesn’t mean that every trade you initiate need to make money because it can’t happen, obviously. But you need to execute them perfectly so that it increases your chance. You will be surprised to know that sometimes it means: you don’t need to initiate a trade at all.
For better understating, you need to consider the aspect of risk management. It helps to protect your capital and minimizes your profit. Traders achieve this by implementing different devices in their trades. Moreover, you need to use stop losses to size your positions properly. In the coconut of £100, a wise trader will spread their risk over a range of trade as wide as possible. If you have ever seen what larger account traders are risking in their reach trade, you may know that it is sometimes as small as 2% capital per trade. But it is not possible for small account traders.
An account with a Spread Betting Company
This step is crucial for inexperienced traders. You need a broker that can offer you small position sizes because of the amount you can risk in each trade. Some brokers suggest you have positions lesser than $1. This is why, first, you need to do extensive research and figure out one that allows you to have the tightest spread in mall position sizes.
By following this step, you can gain more profits with a lesser risk of losing capital. This means you can grow your small trading account and also become a successful trader. So, make sure to follow this step, as mentioned.
Decide Between Cash or Margin Account
Cash accounts and margin accounts help you in different ways. If you talk about cash accounts, they offer you Day Trade without restrictions of PDT rules. However, you might not feel it to be perfect for you. This is because you need to wait for two days for every closing trade to settle. As most of the traders are impatient to wait for two days, they use a different approach as a solution. Traders divide their cash accounts into thirds.
Wondering what that even means? Suppose you have $300 in your cash account. You need to limit yourself by trading $100 one day, $100 the other day, and $100 the third day. By the fourth day, you will get your first $100 and the profit (if you have gained). This will be available for you to initiate the trade. Repeat this process while your account grows.
Let’s suppose you make a $100 profit each day from your trade. Now your account will have $400 for trade. You can trade $200 each day, or you can put $100 in each trade.
Now that you have learned the tricks, you can convert your small trading account into a big one. Make sure to follow the steps accurately and focus on the process, not on the money.